Soaking up the sun

Installing solar panels offers a great return if you can afford the inital cost, but provincial payback may be running out

Shelley Shusterman says that installing a solar electricity system and selling what you generate to the provincial grid is about as good as it gets.

“It’s like your house has a tenant but you don’t have the hassle of being a landlord.”

Last August, Shusterman and her husband, Allan, installed a 9.2-kilowatt, roof-mounted system consisting of 40 photovoltaic (PV) panels. They contracted Ottawa Solar Power (ottawasolarpower.com) to do the work, and have a 20-year contract to sell all the electricity they produce to the grid at 80.2 cents per kilowatt hour. The contract is through Ontario’s microFIT program, introduced in 2009 to encourage renewable energy projects under 10 kilowatts. Ontario Power Authority administers the program.

The hope is that microFIT will reduce the province’s dependence on traditional power sources. Renewable energy is potentially valuable, especially in the summer when heavy air conditioning use can put a severe strain on power supplies, forcing the expensive importation of energy.

The Shustermans spent $66,000 to have the system installed at their three-year-old home in McKellar Park. Over the past 10 months, they have produced about 7,200 kWh for which they’re being paid $5,775. Because March to the end of July is the period of greatest solar electricity generation, thanks to long days, they should hit their projected annual output of roughly 11,000 kWh. That will mean about $9,500 in revenue, giving them a seven- to eight-year payback on the system.

After that, it’s all money in the bank. By setting up a limited partnership to sell the electricity to Hydro Ottawa, they can write off the interest on the credit line money they used to finance the installation. They also charge HST to Hydro Ottawa and consequently got a substantial HST input credit, reducing their cost for the system to about $60,000.

Like most of us, they buy the electricity they use from Hydro Ottawa at the going rate of 5.9 cents to 10.7 cents per kWh.

“It’s the best investment we’ve got,” says Shusterman. “Better than my stock portfolio, and the risk is nil.”

Got your attention? Here’s some of what you need to know before slapping PV panels all over your roof.

The background

Residential solar electricity systems typically consist of PV panels (also called modules) that use solar cells to convert the energy of sunlight into electrical current, and inverters that transform the direct current from the panels into the alternating current used in households.

A second type of system called solar thermal energy uses mirrors or lenses to generate electricity from the sun’s heat. This system is used in large, commercial installations.

Solar cells were invented in the late 19th century, but the ready availability of fossil fuels meant there was no pressure to develop solar electricity applications until the oil embargo and energy crisis of the 1970s. That’s when countries like Germany, Japan and the United States started seriously researching solar technology.

The return of cheap oil stalled solar power again in the 1980s. But since the mid-1990s there’s been a resurgence of interest thanks to escalating fossil fuel prices and uncertainty about long-term oil supplies, climate change worries, and the plummeting cost of solar technology, especially PV panels.

At present, solar accounts for only 0.5 to one per cent of global electricity generation. In the United States, solar-based electricity still costs more than twice as much to produce as nuclear or coal-based power, according to a 2009 report from banking giant HSBC.

Nonetheless, solar electricity generation worldwide has been growing at up to 40 per cent annually for the past few years. In the United States, Bloomberg New Energy Finance recently forecast explosive growth in the solar market because of federal government support and shrinking equipment costs. Provided the industry can attract $1 billion in investment, says Bloomberg, solar-based electricity could grow 42 per cent annually over the next decade, accounting for 4.3 per cent of the nation’s power capacity by 2020.

The Canadian federal government is somewhat less than committed to anything other than traditional energy generation. However, thanks in large part to Ontario’s Feed-In Tariff program, of which microFIT is part, and the province’s Green Energy Act, the Canadian Solar Industries Association (CanSIA) expects continued solar growth in this country as well.

“We’re far behind Germany, which has had a program similar to microFIT for almost 20 years,” says Wesley Johnston, CanSIA’s director of policy and research. “But we’re moving up fairly quickly now.”

Canada’s total installed PV power capacity, for example, tripled in 2009 compared to the end of 2008. About 3,000 solar-related full-time jobs have been created to date, and the association forecasts a total of 35,000 jobs by 2025.

Where are residential systems being installed?

Most solar electricity installations in Ottawa are going on the roofs of existing homes, say suppliers. Apparently new home buyers would rather spend any extra cash they have on granite countertops and other frills than investing in what could net them a tidy profit in the long run.

As well, first-time homebuyers may simply not have enough income to pay the extra for solar power.

Ottawa builders are “generally cautious about solar and other technology,” says Jeff Armstrong, architect and owner of Ottawa’s DAC International, which specializes in pre-engineered homes for export. Armstrong has equipped his own LEED platinum home with a 3.5-kilowatt array of PV panels. He sells enough power to the grid to more than pay for all energy use in his totally electric home.

To make solar power worthwhile, you need a south-facing roof with no shade-casting trees or other obstacles between it and the sun. Even dormers and chimneys can throw long shadows, reducing the output of PV panels.

The roof must also be sound enough to support the weight of the PV panel array.

A free assessment by an installer will determine if your house is a good candidate for solar power.

Incidentally, a study by Natural Resources Canada ranks Ottawa fifth among 17 major Canadian cities and capitals in terms of yearly PV potential.

What it costs & what you’ll earn

Like Ottawa Solar Power, Picton, Ont.-based Cleave Energy (cleave-energy.com), which installs residential systems across the province, charges about $66,000 for a roof-mounted array that will generate the maximum 10 kilowatts permitted under the microFIT program.

Cleave charges $78,000 for an equivalent-sized, ground-based tilt system. The system requires occasional manual adjustment to follow the sun’s changing trajectory through the seasons but generates about seven per cent more electricity annually than a fixed rooftop array, says company sales manager Nancy Cleave.

A ground-based tracking system from Cleave that automatically follows the sun through the day and seasons will set you back $83,000 but pumps even more electricity into the grid because the panels are always at the best angle to absorb the sun’s rays.

Tilt and tracking systems need a large ground area and are generally found only on rural properties. As well, owners of ground-based systems are paid only 64.2 cents per kWh. The rate was originally the same as rooftop systems but was slashed last summer, fomenting fury among suppliers and microFIT applicants whose applications were still pending approval.

The price of PV panels has fallen about 10 per cent annually over the past decade and is expected to continue declining over the next five or so years. However, labour costs have not fallen.

Estimates of annual return on investment vary.

“The unspoken target is 11 per cent,” says Peter Glover, sales and marketing director at Ottawa Solar Power. However, “panels degrade a bit, so over 20 years you should average about 10,800 kWh per year.” In the case of the Shustermans, that means a 20-year revenue of over $173,000 and a profit of more than $112,000, or roughly nine per cent a year minus financing costs.

There’s no guarantee that the current rate of 80.2 cents per kilowatt will continue beyond October of this year. While anyone with a signed contract should be safe, the rate will be reviewed in the fall and could be reduced, especially if the opposition provincial Conservatives continue their attack on what they perceive as wasteful public sector spending.

System installers say they’re busy.

“We’re fully deployed,” reports Graham Findlay, general manager of Ottawa-based 3G Energy Corp. (3g-energy.com), which installs residential and institutional systems around the province. “We’ve got 50 (microFIT) projects booked through to August, and the phone is still ringing.”

The microFIT website mentioned above is your best source on everything from how to sign up for the program to questions you should ask installers and the income tax implications of selling power to the grid.

CanSIA has also developed a microFIT Buyer Guide available online.

Remember to get quotes from more than one installer, and follow up on references.

You’ll need a building permit from the City of Ottawa and electrical permits, which your installer can help with.

You also need approval from your hydro company along with approval of your microFIT application before installation can proceed. Again, the microFIT website will walk you through that process.

Advise your insurance company of your plans.

Installation of a rooftop array usually takes two or three days. The power is shut off for several hours during connection.

Other considerations

Homeowner maintenance of solar PV systems is minimal, although you may have to deal with snow build up. Solar Power suggests an annual $150 service call to clean off bird droppings, check for squirrel nests under the panels (they like the warmth) and vacuum the inverter.

Warranties average 25 years on the panels and 10 on inverters. A new inverter costs $3,300, says Glover, but prices are dropping.

Bank financing is available, often through suppliers.

Under Ontario’s Assessment Act, the value of a residential solar system is exempt from property tax.

When it comes to home value, a recent study by California’s Lawrence Berkeley National Laboratory found that homes in that state sold for a premium if they included a PV system. The average premium for homes with a 3.1 kilowatt system was $17,000.

Some homeowners complain about slow payments for the electricity they produce. Bill Eggertson, who lives near Munster Hamlet, was the first person in Ontario with a rooftop solar system to sign on to the microFIT program. Ten months after installing the system in March 2010, he was still waiting for his first cheque, worth over $8,000, from Hydro Ottawa. The utility blamed startup glitches and Eggertson has since been paid. However, he says that because each cheque covers two months’ worth of generated power and payment is still slow in arriving, he’s so far received only about $10,000 for the $13,000 to $15,000 worth of electricity he’s produced in the past 14 months.

Fortunately, “credit is still cheap, because you’ve laid out a lot of borrowed cash. If interest rates go up, it could be tricky.”

Shusterman, meanwhile, says she’s being “nickel and dimed to death” by Hydro Ottawa. For example, she was charged $30 by Hydro to set up an account that would pay her for the electricity she sells to the utility.

She is also charged for the electricity required to run a second, separate meter that measures how much power she sends to the grid. The charge is small — pennies a month — but she’s also been dinged $10 to $15 on each bill for electricity delivery. Seems there’s a minimum charge.

“The audacity of them, to split that off from my other electricity use and then add the charges,” she says. “In the grand scheme, it’s not that much money, but it’s the principle.”

Beefs aside, is she still sold on small-scale electricity generation?

“It’s win-win: our investment is safe, and as homeowners we’re contributing to the greater good.”

Go to the Clean Energy page (link is on the home page) for information on installing solar electricity systems. The bottom of the Clean Energy page includes a link to Ottawa-area solar systems installers.

The Events link on the site’s main page includes upcoming Home Solar Power workshops.

The co-op offers residents who don’t have the space or inclination to put up their own solar array to invest in a proposed community solar project over 10 kilowatts that will feed power to the grid. The co-op expects to be paid 71.3 cents per kWh under the provincial Feed-In Tariff system. It costs $100 to join the co-op, and investors then buy shares in multiples of $5,000 to a maximum of $100,000. The co-op may also invest in wind, biomass and other renewable energy sources eligible under the Feed-In Tariff structure.

Earlier attempts by the co-op to set up a similar scheme for arrays under 10 kilowatts fell through when microFIT rules were changed last summer so that only homeowners were eligible for the program. That same rule change scotched attempts by some solar companies to lease land from homeowners for small arrays.

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